Asian Stocks Drop on Recession Fears

Monday

HONG KONG (AP) -- Global market turmoil continued into a second week as Asian markets tumbled Monday in the wake of Wall Street's sell-off Friday amid persistent worries about a possible U.S. -- and worldwide -- economic slowdown.

China's benchmark index plummeted 7.2 percent to its lowest point in six months on concerns that a recession in the U.S. would mean less demand for Chinese-made products. Hong Kong's market sank 4.3 percent while India's Sensex dropped 3.5 percent in afternoon trading.

U.S. stock index futures also were down, suggesting that Wall Street was poised to drop again when markets open.

Investors around the world have been jittery for weeks about a U.S. slump, which would likely weaken demand for exports and drag on global growth. There is also concern about a worldwide credit crunch triggered by rising defaults in risky U.S. mortgages, which has led to mountains of bad assets at major American and European banks.

''There's a lot of uncertainty out there: uncertainty over the U.S. economy, uncertainty over China's economy,'' said Rob Hart, an analyst with Morgan Stanley in Hong Kong.

China's Shanghai Composite index plunged 342.39 points to 4,419.29 amid worries about weaker demand from American consumers. Concerns over the potential impact of a prolonged bout of severe winter weather also took a toll.

''Investors, especially institutional investors, are very cautious,'' said Chen Huiqin, an analyst at Nanjing-based Huatai Securities. She said investors were waiting for possible ''market rescuing'' signals from the Chinese government.

''That could have a strong impact on the market,'' Chen said.

Japan's benchmark Nikkei 225 index fell 3.97 percent to close at 13,087.91, erasing its jump on Friday. Markets in South Korea and Taiwan also dropped.

Last week was a tumultuous one for global markets, and it appeared that the volatility would continue.

Asian and European stocks had plunged early last week on worries about slower U.S. growth. They rebounded after a hefty three-quarters cut in U.S. interest rates by the Federal Reserve last Tuesday, as well as news of a U.S. stimulus package. By Friday, markets in Hong Kong and Tokyo had nearly recovered their early week losses.

He pointed out that five of the 11 components of Japan's business condition diffusion index have already hit highs and begun deteriorating. Declines in six of the 11 components often indicates a recession is coming.

''A recession, which was nothing more than a risk scenario six months ago, is now turning into our main scenario,'' Yamakawa said in a report released Friday.

Japanese traders also were cautious ahead of a slew of corporate quarterly earnings this week, including Honda Motor Co. on Wednesday and Sony Corp. on Thursday.

AP Business Writer Elaine Kurtenbach contributed to this report from Shanghai.

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